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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

COMMODITY REPORT: October 9th 2020.

10/09/2020

  • The financial and economic implications of the COVID-19 pandemic continue but gradual easing over an extended period is expected as society struggles to return to a “new normal” with recent noteworthy upsurges in incidence in both rural and urban areas of the U.S. Markets do not appear to be influenced by the imminent General Election on November 3rd.

 

  • Commodity prices this past week were higher, influenced by lower projections for 2020 crop yields developed from the Pro Farmer 7-state Tour, the October 9th WASDE Report and the September Grain Stocks Report. Corn showed an increase of 4.0 percent for the week despite lack of orders from China but presuming lower ending stocks. Soybeans rose 4.1 percent in price this week based on orders booked by China and other nations and projected lower ending stocks attributed to a downward revision of yield and associated factors. Soybean meal rose by 3.7 percent in proportion to soybeans.

 

  • Since July 10th year-to-date exports and 2020/2021 market-year orders for corn have attained 7.41 million metric tons (292.5 million bushels) but with no reported orders this past week. Exports and orders for soybeans amounted to 17.5 million tons (656.9 million bushels) of which 20 percent was ordered during September. Approximately 10 million metric tons (36.5 million bushels) was ordered this past week

 

  • Prospects for commodity exports to China during the 2020/2021 market year that began on September 1st for corn and soybeans have improved. China adjusted their domestic short-term demand for soybeans as a result of an apparent increase in the hog herd after severe losses in 2019 and early 2020 from African swine fever. White-feathered chicken production has now recovered after COVID disruptions and on QSR demand. China is also taking advantage of shipping rates that are rising in order to build inventory.

 

The following quotations for delivery in the months as indicated were posted by the CME at 15H30 on October 9th compared with values posted on October 3rd (in parentheses) reflecting specified months for delivery.

 

COMMODITY

 

Corn (cents per bushel)

 Dec. 394 (379)

March ‘21 402 (389)

Soybeans (cents per bushel)

 Jan. 1,065 (1,023)

March ’21 1,047 (1,005)

Soybean meal ($ per ton)

 Oct. 362 (349)

Dec. 364 (352)

Changes in the price of corn, soybeans and soybean meal over five trading days this past week were:-

 

COMMODITY CHANGE FROM PAST WEEK

Corn: Dec. quotation up 15 cents per bushel (+4.0 percent)

Soybeans: Jan. quotation up 42 cents per bushel (+4.1 percent)

Soybean Meal: Oct. quotation up $13 per ton (+3.6 percent)

 

  • For each 10 cent per bushel change in corn:-

The cost of egg production would change by 0.45 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

 

  • For each $10 per ton change in the price of soybean meal:-

The cost of egg production would change by 0.44 cent per dozen

The cost of broiler production would change by 0.25 cent per pound live weight

 

Uncertainties still include:-

  • There are questions as to whether China will satisfy quantitative obligations in terms of the Phase One Trade during calendar 2020. The Agreement signed in mid-January incorporated U.S. tariff rescissions, promised purchases of agricultural commodities (valued at $36.5 billion in 2020 and $43.5 billion in 2021), concessions on some structural issues by China and strengthened enforcement provisions. For the first half of calendar 2020 China imported agricultural commodities to the value of $7.3 Billion
  • Domestic U.S. soybean and soybean meal demand is now less constrained by COVID-induced cutbacks in the intensive livestock and poultry sectors.

According to the October WASDE, corn to be harvested in calendar 2020 is expected to attain 14,722 million bushels with ending stocks projected at 2,167 million bushels. Final values will be modified by actual yield influenced by weather conditions and export volume. Compared with the October 3rd 2020 at 15H30 the CME quotation for corn on October 9th was up 15 cents per bushel for December delivery to 394 cents, adding to the 14 cent per bushel advance from the preceding week. The Friday October price was the highest since January 24th 2020 at 387 cents per bushel.

The social restrictions imposed in the U.S. as a result of COVID-19 will reduce ethanol demand by 1.5 billion gallons or 10 percent of projected 2020 requirement accepting a nominal ten percent addition to gasoline. More than thirty percent of U.S. ethanol fermentation capacity is off-line at present and the outlook for increased demand is questionable. Ethanol was priced at $1.11 per gallon on October 2nd down 28 cents per gallon (20.1 percent) from the previous week and compared with a five-year low of $0.92 per gallon on March 26th. Concurrently gasoline at $1.21 per gallon (quoted, New York Harbor) is 10 cents per gallon higher than ethanol but has a 63 percent higher BTU rating.

With more plants producing ethanol in the 4th quarter, DDGS is now available at a lower price than in the second quarter. Eastern Corn-belt product was priced at $154 per ton on October 6th, $6 lower than the previous week and $24 per ton less expensive than October 8th 2019.

 Soybeans are the beneficiary of the Phase-One agreement with China and were accordingly up 42 cents per bushel to 1,065 cents for January 2021 delivery. The USDA anticipates a 2020 crop of 4,268 million bushels, but this value is subject to continuing drought in some states. Ending stocks according to the October WASDE projection will attain 290 million bushels.

On October 9th the BRL exchange with the CNY was 0.83, (unchanged from the previous week). The conversion of the US$ to the CNY was set at 6.7 on October 9th. (unchanged from the previous week).

For consecutive years 2017 through 2019 the U.S. supplied 34.4 percent of soybean requirements for China amounting to 95.5 million metric tons. This was followed by a decline to 16.9 percent of 88.5 million metric tons in 2018 and 16.6 percent of 88.0 million metric tons in 2019. The USDA anticipates that soybean imports by China will amount to 95 million metric tons during the 2020-2021 market year.

The following extracts from the September 30th 2020 edition of the Quarterly USDA Grain Stocks Report indicate the levels of storage on farms and in fields and off-farm for corn and soybeans.

  • “Old crop corn stocks in all positions on September 1, 2020 totaled 2.00 billion bushels, down 10 percent from September 1, 2019. Of the total stocks, 751 million bushels are stored on farms, down 8 percent from a year earlier. Off-farm stocks, at 1.24 billion bushels, are down 12 percent from a year ago. The June to August 2020 indicated disappearance is 3.02 billion bushels, compared with 2.98 billion bushels during the same period last year. Based on an analysis of end-of-marketing year stock estimates, disappearance data for exports, and farm program administrative data, the 2019 corn for grain production is revised up 2.67 million bushels from the previous estimate. Corn silage production is revised up 715 thousand tons. Planted area is revised to 89.7 million acres, and area harvested for grain is revised to 81.3 million acres. Area harvested for silage is revised to 6.62 million acres. The 2019 grain yield, at 167.5 bushels per acre, is up 0.1 bushel from the previous estimate. The 2019 silage yield, at 20.2 tons per acre, remains unchanged from the previous estimate”.
  • “Old crop soybeans stored in all positions on September 1, 2020 totaled 523 million bushels, down 42 percent from September 1, 2019. Soybean stocks stored on farms totaled 141 million bushels, down 47 percent from a year ago. Off-farm stocks, at 382 million bushels, are down 41 percent from last September. Indicated disappearance for June - August 2020 totaled 858 million bushels, down 2 percent from the same period a year earlier. Based on an analysis of end-of-marketing year stock estimates, disappearance data for exports and crushings, and farm program administrative data, the 2019 soybean production is revised down 333 thousand bushels from the previous estimate. Planted area is unchanged at 76.1 million acres, but harvested area is revised to 74.9 million acres. The 2019 yield, at 47.4 bushels per acre, is unchanged from the previous estimate”.

COMMENTS

Subscribers are referred to the October 9th WASDE #605 in this edition and the results of the 2020 Pro Farmer 7-State Tour retrievable under the Search TAB.

The President opined on July 10th that he is “not contemplating a second phase of a trade agreement with China”

Approximately $16 billion will be disbursed under the Coronavirus Food Assistance Program (CFAP). As of August 10th, $7.1 Billion was distributed. An additional $14 Billion relief package was announced by the Administration on September 18th with a proportion already distributed.


 
Copyright © 2020 Simon M. Shane